
Sir Arthur Lewis • Background information • born in 1915 in the West Indies • received bachelor of Commerce • earned Ph.D in Industrial Economics • served as intern for U.N. Economic Advisor to the Prime Minister • President of Caribbean Development Bank • Earned Nobel Memorial Prize in Economic Science
Basic Goals and Questions Lewis wants to find • What is the appropriate size of the industrial sector and how is modernization to be financed? • 3 strategies supporting industrialization • export more agriculture commodities • develop a self-sufficient economy emphasizing the home markets • export manufactores
Agriculture Exports • Fits nations such as Burma, Thailand, Gold Coast, and Uganda • 2 arguments against this theory • terms of trade argument • dependency argument
Terms of Trade Argument • This argument was also categorized in two sub parts • historical part (not discussed today) • theoretical part
Theoretical Part • If primary producers develop their exports faster than the industrial countries demand, then the terms of trade must move against them • Found that 85% (plus or minus) of growth of production must exist to developed countries
Dependency Argument • Country begins to export agricultural commodities and becomes paralyzed in it’s industrial takeoff • These profits are transferred overseas instead of the country’s economy
Best jobs are reserved for foreigners, and local people are at loss • Workers become upset and move or just lower their standards • Basically, import products are pushed into the market while local producers suffer massively • This movement makes it harder to find good jobs
This is typically occurring in tropical countries • This study is consistent with the second half of the 19th century but not the 20th century
Import Substitution • Wages in one industry which is good pay will bring wages up in other industries beyond what they can afford (Dutch Disease) • This analysis shows prices and benefits - cost analysis • Causes a push or migration of people into urban areas where work can be found
Self - sufficiency • import substitution strategy that relates to food production for domestic market • we do not know how much exactly to spend on food production so we choose program reasonably effective for our money • there is a huge gap in country’s production of food; tropic countries can produce up to 4% and dry countries can barely make 2% • gap will widen if something is not done
Export Manufactures • This strategy basically was formulated for overpopulated countries • But problem is unpredictability factor • Growth could be up to 10% a year but behavior of developed countries is unpredictable • It all depends on if they return to a fast growth of their GDP